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Third Quarter 2013 Global ISG Outsourcing Index

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The ISG Outsourcing Index (formerly the TPI Index) provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media. For more than a …

The ISG Outsourcing Index (formerly the TPI Index) provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media. For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance.

The global outsourcing market is constantly evolving. Keep pace with the change and capitalize on the latest trends with the ISG Outsourcing Index.

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  • 1. Hosted by: SK Prasad Borra, Rishi Jhunjhunwala and Paul Thomas Goldman Sachs 10 October 2013 The Global ISG Outsourcing Index Third Quarter 2013 Market Data and Insights
  • 2. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 2 Covering the state of the outsourcing industry for global, commercial contracts.* Welcome to the 44th Quarterly Outsourcing Index Review Esteban Herrera Partner John Keppel Partner & President Dr. David Howie Partner
  • 3. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 3 At a Glance Scorecard 3Q13 3Q Y/Y 3Q Q/Q YTD YTD ACV ($B)* Change Change ACV ($B)* Change Global Market $ 5.8 1% 66% $ 14.1 -20% New Scope $ 3.2 -19% 21% $ 8.3 -30% Restructurings $ 2.6 42% 200% $ 5.8 3% Mega-relationships $ 1.4 -15% 119% $ 3.4 -26% ITO $ 4.4 15% 102% $ 9.7 -13% BPO $ 1.4 -29% 5% $ 4.4 -31% Americas $ 1.8 -7% 65% $ 4.9 -26% EMEA $ 3.5 16% 89% $ 7.8 -5% Asia Pacific $ 0.5 -41% -13% $ 1.4 -47% ‘‘‘‘BEST 3Q PERFORMANCE EVER FOR BOTH ACV AND NUMBER OF CONTRACTS AWARDED GREATEST 3Q PERFORMANCE EVER IN RESTRUCTURING MARKET DRIVEN BY 9 RESTRUCTURING MEGA-RELATIONSHIPS STRONGEST 3Q ITO PERFORMANCE EVER IN TERMS OF BOTH ACV AND NUMBER OF CONTRACT AWARDS, WHILE BPO ACV SLOWS FOR SECOND STRAIGHT QUARTER ON INCONSISTENT LARGE DEAL ACTIVITY EMEA HAS STRONGEST 3Q PERFORMANCE EVER, DRIVEN BY MEGA-RELATIONSHIPS AND GENERALLY HIGH CONTRACTING ACTIVITY AMERICAS AND ASIA PACIFIC DOWN Y/Y DUE TO LACK OF LARGE DEALS AND WEAK PERFORMANCE IN THE TRADITIONAL LEADING INDUSTRY SECTORS
  • 4. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 4 3Q Broader Market ACV of just under $6B was up 1% Y/Y and up 65% Q/Q and resulted in the best third quarter ever. Year-to-date Broader Market ($B)* Year-to-date Contracting Counts Broader Market Contract Award Trends $8.3 $11.8 $9.8 $12.0 $9.6$9.6 $7.6$8.5$8.2$8.4 $5.8 $5.7 $5.6 $4.4 $4.1$3.9 $2.9$2.6$3.5$3.7 201312111009080706052004 $0 $5 $10 $15 $20 1H ACV 3Q ACV 485 601604 505 472 364299295262297 353255273 228208 191 14912911596 - 200 400 600 800 1,000 201312111009080706052004 1H Counts 3Q Counts
  • 5. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 5 New scope ACV of $3.2B was off 19% Y/Y against a tough 3Q12 compare, but up 21% Q/Q. Restructuring ACV of $2.6B was the highest quarter to date. Restructuring Year-to-date ACV ($B)* Broader Market New Scope & Restructuring Trends New Scope Year-to-date ACV ($B)* Restructuring Year-to-date CountsNew Scope Year-to-date Counts $5.1 $8.0$7.1 $8.7 $7.4 $7.4 $6.1$5.0 $6.3$7.0 $3.2 $3.9 $3.1 $2.6 $3.1$2.8 $2.3 $2.0 $2.5 $2.4 201312111009080706052004 $0 $2 $4 $6 $8 $10 $12 $14 1H ACV 3Q ACV $3.2$3.8$2.6$3.4$2.2$2.2$1.5 $3.5 $1.9$1.4 $2.6$1.8 $2.5$1.8$1.0$1.0$0.7 $0.6 $1.0$1.3 201312111009080706052004 $0 $2 $4 $6 $8 $10 $12 $14 1H ACV 3Q ACV 352 454453 392365 291245232211249 238 198205 171172 154 1281099175 - 100 200 300 400 500 600 700 201312111009080706052004 1H Counts 3Q Counts 133147151 1131077354635148 115 5768 573637 21202421 - 100 200 300 400 500 600 700 201312111009080706052004 1H Counts 3Q Counts
  • 6. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 6 $1.4 $0.7 $1.4$1.0 $1.7 $2.2 $0.8 $2.3 $1.7 $1.1$0.9$0.7 $1.4$1.2$1.3$1.4$1.1$1.3 $3.3 $1.9 $2.8$2.9$2.8$2.5 $3.6 $3.1 $2.7 3Q132Q1Q4Q3Q122Q1Q4Q3Q11 105879126126 201613232023231821 323 187 256242 226241 296 270 246 3Q132Q1Q4Q3Q122Q1Q4Q3Q11 Ten Mega-relationships were awarded in 3Q13, yet the market is being driven increasingly by smaller contract awards. Broader Market Quarterly Counts by Bands Broader Market Contract Trends by Deal Size Boarder Market Quarterly ACV(B)* by Bands $5-39M $40-99M $100M +$5-39M $40-99M $100M +
  • 7. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 7 3Q ITO ACV of almost $4.4B was up 15% Y/Y and 100% Q/Q. ITO ACV performance was the best third quarter ever. ITO Year-to-date ACV ($B)* ITO YTD Industry ACV ($B)* ITO Contract Award Trends $5.3 $7.3 $6.3 $9.2 $6.8$6.5$5.7$6.3$6.0 $4.8 $4.4 $3.8 $3.9 $3.2 $3.0$2.6 $1.9$1.6$2.4 $2.8 201312111009080706052004 $0 $5 $10 $15 1H ACV 3Q ACV ITO Year-to-date Counts 298 374377 316320 230194173165184 247 164166 131136 119 95 727062 - 100 200 300 400 500 600 201312111009080706052004 1H Counts 3Q Counts $2.04 $2.58 $0.69 $1.31 $1.38 $0.67 $0.64 $0.36 $- $1 $2 $3 $4 Manufacturing Financial Services Telecom & Media Energy Travel, Transport, Leisure Healthcare & Pharma Business Services Retail YTD 3Q12 YTD 3Q13
  • 8. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 8 3Q BPO ACV of just under $1.4B was down 29% Y/Y but up 5% Q/Q. YTD performance slowed as BPO dropped 31% from a year ago. BPO Year-to-date ACV ($B)* BPO YTD Industry ACV ($B)* BPO Contract Award Trends BPO YTD Counts $3.1 $4.5 $3.5 $2.9$2.8$3.1 $2.0$2.2$2.2 $3.6 $1.4 $1.9 $1.7 $1.2$1.1$1.3 $1.0$1.0$1.1 $0.9 201312111009080706052004 $0 $2 $4 $6 $81H ACV 3Q ACV 187 227227 189152 13410512297113 10691 107 97 72 72 54 57 4534 - 100 200 300 400 201312111009080706052004 1H Counts 3Q Counts $1.18 $0.68 $1.08 $0.45 $0.37 $0.17 $0.33 $0.17 $- $0.5 $1.0 $1.5 $2.0 Financial Services Manufacturing Telecom & Media Energy Travel, Transport, Leisure Business Services Healthcare & Pharma Retail YTD 3Q12 YTD 3Q13
  • 9. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 9 85% of the Top ITO Provider list is unchanged from previous years. The Top BPO group has more turnover, yet 40% of Top BPO providers do repeat year-to-year. Top Service Providers Across the Globe Notes: Service providers in alphabetical order; no rankings implied. Placements based on ACV from commercial contract awards sourced from ISG Contracts Knowledgebase ®. Accenture AT&T Atos BT Capgemini CGI CSC Dell HCL HP IBM Infosys Tech Mahindra Nihon Unisys Polaris Software Labs Singtel Optus TCS T-Systems Virtusa Wipro Xerox Accenture Aditya Birla Minacs Allscripts Aon Hewitt Atos Capgemini Capita Group CGI Communisis CSG CSC Fidelity Genpact HCL Infosys StarTek TCS Wipro WNS Xchanging Xerox ITO 2013 YTD BPO 2013 YTD
  • 10. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 10 Americas 3Q ACV of $1.8B was down 7% Y/Y but up 65% Q/Q; At 139, the number of 3Q13 contract awards increased significantly, up 30% Y/Y and 107% Q/Q. Americas Year-to-date ACV ($B)* Segment Details Like-Quarter ACV ($B)* Americas Contract Award Trends YTD Counts 180 274262 245 216 157135145124128 139 107118104 82 72 63485642 - 100 200 300 400 500 201312111009080706052004 1H Counts 3Q Counts $1.1 $0.7 $1.1 $0.7 $0.0 $0.5 $1.0 $1.5 New Scope Restructuring ITO BPO Prior 5 Like-Qtr Range Avg of 5 Prior Like-Qtrs 3Q12 3Q13 $3.1 $4.8 $3.8 $5.8 $4.3 $3.0$3.1 $4.6 $3.7 $4.4 $1.8 $1.9 $2.0 $2.0 $1.9 $1.2$1.0 $1.1 $1.9$1.2 201312111009080706052004 $0 $2 $4 $6 $8 $10 1H ACV 3Q ACV
  • 11. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 11 Most of the sub-regions had 3Q ACV up Q/Q but down Y/Y. YTD, Manufacturing accounted for over 75% of the Americas decline. Americas Contract Award Trends Detail $0.10 $0.00 $0.03 $0.01 $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 $0.40 $0.45 $0.50 Canada Mexico Brazil Other LatAm Prior 5 Like-Qtr Range Avg of 5 Prior Like-Qtrs 3Q12 3Q13 Americas Sub-regions 5 Prior Like-Quarter ACV ($B)* $1.10 $0.97 $0.95 $0.63 $0.40 $0.33 $0.28 $0.27 $0.0 $1.0 $2.0 $3.0 Financial Services Telecom & Media Manufacturing Healthcare & Pharma Energy Retail Business Services Travel, Transport, Leisure YTD 3Q12 YTD 3Q13 Americas Industries YTD ACV ($B)* $1.63 $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 $1.6 $1.8 $2.0 U.S.
  • 12. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 12 EMEA 3Q ACV of $3.5B was up 16% Y/Y and 88% Q/Q. The strongest 3Q ACV ever was driven by nine Mega-relationships and very high contracting activity. EMEA Year-to-date ACV ($B)* Segment Details Like-Quarter ACV ($B)* EMEA Contract Award Trends YTD Counts 245252272 204201 171 125113115128 176 111124 10294 94 63664544 - 100 200 300 400 500 201312111009080706052004 1H Counts 3Q Counts $1.8 $1.7 $2.9 $0.6 $0 $1 $2 $3 $4 New Scope Restructuring ITO BPO Prior 5 Like-Qtr Range Avg of 5 Prior Like-Qtrs 3Q12 3Q13 $4.3$5.1$5.0$5.6 $4.1 $5.9 $3.3$2.9 $4.1 $2.9 $3.5 $3.1$3.2$2.0 $1.6 $2.0 $1.5 $1.3 $1.3 $2.1 201312111009080706052004 $0 $2 $4 $6 $8 $10 1H ACV 3Q ACV
  • 13. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 13 DACH, France and Southern Europe had strong quarters, up Y/Y and Q/Q. YTD, Transportation was up 88%, while weakness persisted in Financial Services and Manufacturing. EMEA Contract Award Trends Detail EMEA Sub-regions 5 Prior Like-Quarter ACV ($B)* $2.3 $1.6 $1.2 $1.2 $0.6 $0.5 $0.2 $0.2 $0 $1 $2 $3 Financial Services Manufacturing Travel, Transport, Leisure Energy Telecom & Media Business Services Healthcare & Pharma Retail YTD 3Q12 YTD 3Q13 EMEA Industries YTD ACV ($B)* $0.84 $0.38 $1.02 $0.21 $0.21 $0.31 $0.55 $0.04 $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 $1.6 U.K. & Ireland Nordics DACH Africa & Middle East France Benelux Southern Europe E. Europe & Russia Prior 5 Like-Qtr Range Avg of 5 Prior Like-Qtrs 3Q12 3Q13
  • 14. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 14 $0.9 $2.0 $1.0 $0.7 $1.3 $0.7 $1.2 $1.0 $0.4 $1.1 $0.5 $0.8 $0.5 $0.4 $0.6 $0.6 $0.4$0.2 $0.3 $0.4 201312111009080706052004 $- $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 1H ACV 3Q ACV Asia Pacific 3Q ACV of $0.5B was down 41% Y/Y and 13% Q/Q. Quarterly regional performance lacked significant large deal activity. Asia Pacific Year-to-date ACV ($B)* Segment Details Like-Quarter ACV ($B)* Asia Pacific Contract Award Trends YTD Counts 60 7570 56 55 363937 23 41 3837 31 2232 2523 15 14 10 - 20 40 60 80 100 120 201312111009080706052004 1H Counts 3Q Counts $0.24 $0.21 $0.44 $0.01$0.0 $0.2 $0.4 $0.6 $0.8 New Scope Restructuring ITO BPO Prior 5 Like-Qtr Range Avg of 5 Prior Like-Qtrs 3Q12 3Q13
  • 15. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 15 India was down Y/Y due to difficult comparisons in 2012 when several large deals were awarded. The YTD regional performance was affected by slowing in the Financial Services, Manufacturing and Telecom sectors. Asia Pacific Contract Award Trends Detail $0.25 $0.06 $0.07 $0.05 $0.02 $0.01 $0.0 $0.1 $0.1 $0.2 $0.2 $0.3 $0.3 $0.4 $0.4 $0.5 ANZ Greater China ASEAN India and South Asia Japan South Korea Prior 5 Like-Qtr Range Avg of 5 Prior Like-Qtrs 3Q12 3Q13 Asia Pacific Sub-regions 5 Prior Like-Quarter ACV ($B)* $0.40 $0.25 $0.19 $0.19 $0.16 $0.15 $0.06 $0.02 $0.0 $0.4 $0.8 $1.2 Financial Services Travel, Transport, Leisure Energy Manufacturing Telecom & Media Healthcare & Pharma Business Services Retail YTD 3Q12 YTD 3Q13 Asia Pacific Industries YTD ACV ($B)*
  • 16. Special Topic for Third Quarter 2013 John Keppel Partner & President
  • 17. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 17 Since 2011, Public Sector ACV has outpaced Commercial Sector ACV by almost 30%. Public Sector Sourcing, a Large and Growing Market $6.6 $2.7 $7.2 $7.0 $7.4 $7.9 $7.9 $5.6 $5.1 $9.7 $9.2 1Q 2011 2Q 3Q 4Q 1Q 2012 2Q 3Q 4Q 1Q 2013 2Q 3Q 2013 Commercial Sector ACV $B Public Sector ACV $B Public Sector Sourcing Outpaces Commercial Sourcing* 56% Public Sector Share of Outsourcing Market* ACV from 2011 until today $135 billion
  • 18. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 18 Regional Public Sector Markets Defined The U.K. and U.S. Federal Public Sectors hold ACV market shares that far outpace their GDP share. U.S. and European-based providers tend to be market leaders regardless of geography. 53% 5% 3% 26% 6% 5% Europe Accenture BT Capgemini Indra Sistemas T-Systems U.K. Atos BT Capgemini Capita Serco ANZ Accenture CSC Fujitsu IBM Telstra U.S. State/Local Accenture CGI HP MAXIMUS Xerox Canada Bell Canada HP IBM Lockheed Martin SNC-Lavalin U.S. Federal CSC General Dynamics Lockheed Martin Northrop Grumman SIAC *Other Regions = 2% Percentage Share of Public Sector Market by Major Region* Top 5 Providers by Geographic Segment Listed Note: Service providers in alphabetical order; no rankings implied. Placements based on the number of public sector contracts awards sourced from ISG Contracts Knowledgebase ®.
  • 19. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 19 Unique Aspects of Public Sector Contracting As with the commercial sector, the public sector primary sourcing objectives are cost savings and operational efficiency. However, there are notable differences in how they get there. Public Sector Core Contracting Attributes  Maximizing service delivery reach trumps shareholder value in scope decisions  Geographic scope is local, not global  Service integration and management emphasized, as provider consortium bids are more prevalent  Procurement constraints on contracting attributes like size, duration and renewal processes  Reluctance to offshore outsourced solutions due to a perception that jobs may be ‘exported’ from the local area
  • 20. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 20  Record-breaking 3Q ACV performance with impressive contracting activity levels across the globe  Market fueled increasingly by smaller deals, yet 3Q activity included 10 Mega-relationships  ITO contracting activity vigorous across all industries  BPO ACV in a lull, but activity levels remain strong, with performance shifting away from central processes and into industry-specific verticals  EMEA turned in a great performance particularly in Restructurings, with solid New Scope results as well  Americas ACV slowed, but contract activity picked up  Asia Pacific continues to struggle to return to more recent higher contracting levels, although 2012’s high was an outlier  Robust contracting activity in 3Q13 should continue through 4Q  ACV and contract volume to surpass Q4 2012 results  First half weakness remains a drag on annual ACV, so expect the year to finish strong but end down, somewhere in the range of 12-15% lower than full year 2012 3Q13 ISG Outsourcing Index Summary and Outlook summary market outlook market
  • 21. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 21 Please contact us with your questions and comments. Learn More --- Media Contacts --- ► John Keppel Partner and President, ISG +44 (0)7879 432 212 john.keppel@isg-one.com ► Alex Kozlov Director, ISG +1 617 558 3377 alex.kozlov@isg-one.com blog.isg-one.com ► Jim Baptiste Matter Communications for ISG +1 978 518 4527 jbaptiste@matternow.com
  • 22. Third Quarter 2013
  • 23. © 2013 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 23 The ISG Outsourcing Index has moved to ACV as the primary measure of the Broader Market. In transition, we will continue to provide a high-level TCV view of the market via a Scorecard analysis. 3Q13 TCV Scorecard *Contracts with TCV ≥ $25M from the ISG Contracts Knowledgebase® Scorecard 3Q13 3Q Y/Y 3Q Q/Q YTD YTD TCV ($B)* Change Change ACV ($B)* Change Global Market $ 24.4 -12% 35% $ 63.4 -20% New Scope $ 14.7 -20% 6% $ 39.3 -28% Restructurings $ 9.7 6% 134% $ 24.1 -3% Mega-deals $ 4.1 -29% 42% $ 12.0 -12% ITO $ 18.3 2% 72% $ 41.3 -19% BPO $ 6.1 -36% -17% $ 22.1 -22% Americas $ 6.1 -35% 17% $ 20.4 -33% EMEA $ 16.3 10% 63% $ 36.2 -84% Asia Pacific $ 2.0 -40% -28% $ 6.8 -36%
  • 24. www.isg-one.com Information Services Group is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience of global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 800 employees and operates in 21 countries. knowledge powering results®